Armor as damage reduction increases your effective hit points. It lets you take more hits than you would normally. I’d expect a game with armor-as-DR to balance armor class, damage, and hit points to take that into account.Who said anything about increasing hit points by armour?
For example, a B/X bandit has a THAC0 of 19 and does 1d6 damage (average of 3.5). If you have 4 hp, and your armor has an AC of 7 with DR 2, then your effective hp is ~7 — you’ll last 4.4 rounds on average instead of 2.5 with no DR.
Of course, if you get unlucky, you can still die sooner than expected. Had that experience one raid tier in WoW when our MT insisted on gearing for avoidance (and eHP) because it was “optimal”. Those were certainly stupid wipes.